- The KIF has decried the impact of spot ETFs on the nation’s local economy.
- Crypto ETFs risk siphoning investment from local markets, potentially stunting domestic economic growth.
- South Korean regulators have not approved the issuance or trading of crypto ETFs.
South Korea’s financial watchdog has warned against the introduction of spot crypto Exchange-Traded Funds (ETFs), arguing they could harm the nation’s economy and financial stability.
A section of the recently published report read:
“Allowing such products can lead to side effects such as increased inefficiency in resource allocation and increased exposure to crypto-related risks in the financial market.”
The Korean Financial Institute (KIF) also thinks spot ETFs would hurt the nation’s financial stability.
The financial think tank further contends that crypto ETFs would divert attention from the local financial market. According to the research body, their proliferation may lead to the diversion of large amounts of cash flow originally intended for the local financial market. The KIF suggests this could result in reduced investments in local industries.
Furthermore, the KIF argues that redirecting investment capital to crypto ETFs could make the local market more vulnerable to crypto-related crises, potentially increasing investor distrust in the market and regulators.
Despite the highlighted negatives, the South Korean think tank acknowledged the potential of crypto ETFs. The KIF noted they could become a good store of value if their underlying crypto assets grow to become more defined and unique.
It is important to note that South Korean regulators have not yet approved the issuance or trading of crypto ETFs. The regulators cite the fact that Bitcoin and other cryptos cannot serve as underlying assets for such investment products.
However, the country’s left-wing ruling Democratic Party is actively working towards making spot crypto ETFs available for local investors. This move was part of the political party’s campaign promises during the last general election.
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